Wednesday, December 17, 2014

In conversations about the declining homeownership rate in
the U.S., some commentators have pointed to declines in the share of married people as an important contributing factor. To be sure, married couples are much more likely to be homeowners than unmarried individuals, due to their generally better socio-economic status. Married couples are also more likely to have children, and therefore more likely to want larger homes in areas with more family-friendly amenities such as safe neighborhoods and good schools. And these features are more often found in suburban neighborhoods where a larger percentage of the housing stock is available to own rather than rent. A decrease in married couples, goes the argument, should reduce the share of households that own their homes. While this is true, all else equal, this rationale fails to consider three important facts about marriage and homeownership that suggest this effect is not as large as many people imagine, and that recent trends are not necessarily indicative of a fundamental shift in demand for owned homes.

Fact #1: Marriage rates have been declining for decades.

While concern over the connection between declining marriage rates and declining homeownership has gained traction in recent years, the share of households headed by a married couple has actually been on a steady downward trend since the 1960s when over 70 percent of adults ages 18 and older were married (Figure 1). Declines since 1960 in the married share have been dramatic, falling fully 17 percentage points from a half-century earlier. The time frame of this decline, however, coincides with a period of steady increases in the national homeownership rate, from 62 percent in 1960 to 66 percent in 2000. Indeed, only during a brief period in the early 1980s did the homeownership rate decline slightly, at the same time that marriage rates were falling (though moderating somewhat from more dramatic decreases during the 1970s).

Since the turn of the century, of course, the homeownership rate has declined from a peak of 68 percent in 2004 to 64 percent earlier this year. In that time, the married share of the population has also fallen slightly, thus fueling the argument that the two trends are linked. Yet these recent declines in homeownership and marriage rates have also been greatly impacted by conditions in the macro economy, particularly the slow pace of earnings growth and high unemployment. The decline in marriage rates is also clearly a continuation of a long-term trend related to socio-demographic changes in the population and shifting social norms around relationships and cohabitation. The fall-off in homeownership, meanwhile, is largely viewed as a reversion to conditions that existed prior to the late 1990s and early 2000s spike in home buying, rather than purely a reflection of changing household compositions. This is not to say that there is no connection between marriage and homeownership, only that there is more to this story. As the statisticians say, correlation is not causation, so looking at recent changes in marriage and homeownership does not necessarily mean that one fully explains the other.

Note: The homeownership rate from 2000-2014 is calculated by using the Decennial Census rate from 2000 and adjusting annually by the change in the homeownership rate reported by the Housing Vacancy Survey.

The share of married adults in the U.S. only tells part of the story about the marital status of Americans. A better indicator may be the share that have ever been married, observed in mid-life when most people are settled and those who will marry have likely done so. By their late 40s, more than 85 percent of Americans report having been ever married, with that share leveling off over the last decade (Figure 2). Even by their late 30s, nearly 80 percent of people have tied the knot. The big change over the last 30 years, however, has been in the share of young adults aged 25-34 who have not married, which rose from 25 percent in the mid-1980s to almost 50 percent today, with notable acceleration over the last 10 years. The driving force behind this trend has been a steady increase in the age at first marriage, from 20 years old for women and 22.5 for men in the late 1950s, to 26.5 and 29 years old, respectively, in 2011. Young adults are more likely today to pursue post-secondary education, to relocate to a new area for employment, and to live with partners before marrying, all of which combines to delay the trip down the aisle. Again, these trends are not new, but have been gaining momentum for the past half-century.

Source: U.S. Census Bureau’s Decennial Census and Current Population Surveys.

Fact #3: It’s not only the current marriages that drive homeownership.

This last point about marriage and homeownership is one that does not get a lot of attention, but is very important to conversations about homeownership rates going forward. Among the unmarried population in the U.S. are a large number of previously married adults – those who are divorced or whose spouse has died – who have very different homeownership experiences from those who have never been married. Indeed, even as married households have been on the decline in the U.S., the share of householders who report being previously-but-not-currently married has remained steady at around 30 percent (Figure 3). The effect of these prior marriages on homeownership is profound, as previously-married householders are much more likely to own than never-married householders. Many of these are ‘legacy’ homeowners who bought while still married and remained in the home after becoming single, although some likely bought homes without a spouse, using proceeds from a home they owned when married. Previously-married householders have also seen a smaller decline in their homeownership rate, relative to currently-married householders, since the end of the housing boom a decade ago. All of these groups, moreover, have homeownership rates today that are at or above their pre-boom levels from the mid-1990s, suggesting that homeownership has been an important and popular choice for all households regardless of their marital status.

Note: Data are share of householders, not persons, by marital and tenure status. Households who report being separated from their spouse are not considered to be currently married.

Source: U.S. Census Bureau’s Current Population Surveys.

These facts make clear that recent concerns about the decline in marriage leading to less demand for homeownership are perhaps overstated. While married couples continue to own homes at higher rates than unmarried individuals, there is more to this relationship. Only recently have shares of married couples and shares of home-owning households both been declining, due mostly to economic factors, while vast majorities of the population still aspire to both marriage and homeownership. Nor are married couples the only ones owning homes, as both previously-married and never-married householders significantly increased their homeownership rates during the housing boom, with only small declines since the peak in 2005.

Finally, it is worth noting that most discussions of the role of marriage in housing decisions fail to consider the importance of other changes in household demographics that have had an impact on homeownership rate; the increasing share of minorities in the population, for example, can have a lowering effect on homeownership rates, while higher rates of college educated adults in the population should increase the share that own. The most important factors in recent declines in homeownership rates, however, are the performances of the housing market and economy, which determine whether households of all types are able to purchase homes. Stagnant incomes and constrained credit have had greater impacts on homeownership rates since the end of the housing boom than long-term demographic changes, and will likely continue to drive homeownership trends in the near future.

Wednesday, December 10, 2014

What makes a home healthy or unhealthy? As Mariel Wolfson
illustrated in her recent blog, this question is a multifaceted one. Old hazards
persist, including lead paint, combustion pollution, formaldehyde, and
radon. There is also growing awareness of other invisible pollutants,
including volatile and semi-volatile organic compounds and endocrine disrupting
chemicals. These elements enter homes
not only through household products and goods but, as research from the Healthy Building Network shows, through building materials
themselves. Achieving optimal
ventilation remains essential to healthy indoor air quality. Attention
should also be paid to the surrounding neighborhood, including access to health
services and healthy food, walkability and accessibility, and levels of outdoor
air pollution. Some communities are
disproportionately affected by polluting industries and waste disposal sites in
their neighborhoods, making it even more difficult for residents to enjoy a
healthy home environment.

Households’ perceptions of health risks influence behaviors and
in turn affect the home environment, so the Joint Center recently surveyed
homeowners to learn about their ‘healthy housing’ concerns. These include
but are not limited to worries about mold/moisture, indoor air quality,
chemicals at home, and noise and lighting issues which might affect household
health.

We found that roughly one out of four homeowners expressed some
level of concern about an aspect of their home negatively impacting their
household’s health. One out of ten households described their concerns as
‘moderate’ or ‘major’. High income households (earning $100K or more)
were slightly more likely to express concern, as were households with one or
more children.

By far the most frequently cited problem was indoor air quality,
with more than two thirds of the concerned households identifying it as an
issue. Water quality and harmful chemicals/materials followed, with around
30-40 percent of households citing them. As the chart below shows, these
indoor health risks ranked even above basic safety issues. Least commonly
cited problems were light and noise issues.

Notes: Sample size is 529. Households that expressed some basic level of healthy housing interest/concern were asked, “Which general category(ies) best describes your concern about the impact of your home on your household’s health?” Safety or comfort of the structure includes trip hazards, inadequate heating/cooling etc. Other basic safety issues include pests, lack of smoke detectors/locks/child safety features, etc.

When asked to be more specific about the source of their
indoor air quality concerns, top issues cited by owners included managing
household dust and/or pet dander, air pollution from indoor cooking/heating,
and lack of sufficient ventilation. Over half of households concerned
about residential indoor health risks identified these as problems. Just
under half of those worried about indoor health cited chemicals from
interior furnishings and from the building/structure itself as a source of
concern.

Among all homeowners expressing concerns related to indoor
health, more than half took at least one specific action to remediate
their concern. Most frequent actions completed or planned in the near
future included water filter installation, choice of paint with no or low
airborne toxins, mold removal, and installation of room darkening
curtains/shades. Less frequent actions included removal of asbestos and
lead paint.

Over the coming months, the Joint Center will analyze results
from similar surveys of renter households, as well as of remodeling contractors,
to better understand how healthy housing concerns and behaviors are playing out
in the current residential remodeling market.

Friday, December 5, 2014

From time to time, Housing Perspectives features posts by guest bloggers. Today's post, written by Jeffrey Lubell, Director of Housing and Community Initiatives at Abt Associates, reflects thoughts from a book launch & panel discussion he participated in at the Harvard Kennedy School on October 30, 2014. The panel was entitled "The Future of Homeownership in America", was moderated by NPR Reporter Chris Arnold, and also included panelists Chris Herbert (Joint Center for Housing Studies), Marsha Courchane (Charles River Associates), and Patricia McCoy (Boston College).

In a recent editorial
titled "Homeownership and Wealth Creation," the New York Times highlighted an analysis
by Chris Herbert, Dan McCue, and Rocio Sanchez-Moyano of the
Harvard Joint Center for Housing Studies that re-examined whether homeownership
contributes to individual wealth creation in light of the experience of
homeowners during the housing bust of the late 2000s. Building on the findings of this analysis, the
Times emphasized that homeownership remains a critically important vehicle for
the accumulation of wealth and expressed support for policies that make
mortgage products safer and boost Americans’ incomes to expand their purchasing
power.

The paper by Herbert, McCue and Sanchez-Moyano was originally
presented at a symposium in 2013 and recently published as a chapter in a new Joint Center book, Homeownership Built to Last. Earlier this fall, the Joint Center hosted a book launch that included presentations by authors of four of the
chapters in the book. As a contributing author and participant in
the book launch, I am pleased to see the New York Times utilize the
research in Homeownership Built to Last
for its intended purpose: to draw lessons from the foreclosure and housing
crises and other recent experience that can help us develop policies to support
sustainable homeownership.

I would take the Times’ recommendations one step further,
however. In my chapter and presentation
at the book launch, I urged us to take the additional step of working to expand the
supply of homeownership opportunities affordable to low- and moderate-income
households by investing in shared equity homeownership. Shared equity homeownership represents an
alternative to down payment grants and forgivable loans that enables asset-building
homeownership opportunities to be provided to many more families with the same
amount of government investment. Under
this approach, a government subsidy (or an inclusionary housing policy) is used
to reduce the purchase price of a home.
In exchange for a more affordable purchase price, the homebuyer agrees
to sell the home to the next buyer at an affordable price, set by formula to
balance wealth creation by the homeowner with ongoing affordability to the next
owner.

The result is the preservation of the initial subsidy to
help one homebuyer after another. While
the shared equity homeowner gives up the opportunity to make a killing if the
market goes through the roof, the homeowner nevertheless has the opportunity to
build sizable and potentially life-altering wealth through the combination of
the forced savings of a fixed-rate mortgage and a generally predictable amount of
home price appreciation. As an added
bonus, shared equity homeownership may help reduce the incidence of foreclosure
and provides some protection from modest declines in the market.

Shared equity homeownership is not for everyone. But it does fill an essential market
niche. If we want to expand
asset-building opportunities through homeownership to the low- and
moderate-income households that really need them, we’re going to need to both
expand the credit box so that more families can access reasonably priced
mortgage capital AND expand the supply of homes low- and moderate income
households can afford through strategies like shared equity homeownership.

Thursday, November 20, 2014

The (somewhat) good news: according to the newly-released 2013 American Community Survey (ACS), housing cost burdens declined for the third straight year in 2013. Last year, 39.6 million households spent more than 30 percent of their income on housing, down from 40.9 million in 2012 and a peak of 42.7 million in 2010. Still, just over a third of U.S. households (34 percent) were cost burdened in 2013, including about a quarter of all homeowners (26 percent) and half of all renters (49 percent) (Figure 1).

Notes: Moderate (severe) burdens are defined as housing costs of 30-50% (more than 50%) of household income. Households with zero or negative income are assumed to have severe burdens, while renters paying no cash rent are assumed to be without burdens.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Last year’s decline in the number of cost-burdened households, however, occurred almost exclusively among homeowners. Nearly 19 million owners were cost burdened in 2013, down from 20.3 million in 2012. The number of owners with severe cost burdens – paying more than 50 percent of income for housing – also slid, from 8.5 million in 2012 to 8.1 million in 2013. The easing of owner cost burdens is due in part to a dramatic decline in median homeowner housing costs. After surging during the housing bubble, inflation-adjusted owner costs have dropped to about 2.5 percent below their 2001 level (Figure 2). Owner burdens are also down due to a significant reduction in the overall number of homeowners – fully 294,000 fewer households in 2013 than 2012. This decline in the number of homeowners for the third straight year (and the fifth time since 2007) suggests that many burdened owners dropped out of ownership, moving into the costly rental market.

Notes: Median costs and incomes are real values adjusted using the CPI-U for All Items. Owner housing costs are first and second mortgage payments, property taxes, insurance, homeowner association fees, and utilities. Renter housing costs are cash rent and utilities.Source: JCHS tabulations of US Census Bureau, American Community Surveys.

With many exiting ownership and new households forming, the number of renter households was up by 615,000 in 2013. Indeed, a major reason why renter cost burdens remain persistently high is that the overall number of renters continues to grow. Despite a slight decline in cost-burdened share, the sharp growth in renter households pushed the number with cost burdens up for the twelfth consecutive year, reaching 20.8 million in 2013. Of these, about 11.2 million were severely burdened in both years. Cost pressures also continue to drive burdens higher as over the past decade, renter costs have largely gone up, while renter incomes have declined. As Figure 2 shows, real median renter costs in 2013 were about five percent higher than in 2001 while, even with modest income gains in 2013, median incomes were nearly 11 percent lower. If past patterns hold and income growth remains stagnant, rental costs continue to climb, and affordable ownership stays out of reach, rental cost burdens will only continue to grow.

Tuesday, November 4, 2014

According to
the Federal Reserve Bank of New York, aggregate mortgage debt stood at $8.6 trillion in Q2 2014, down from its peak of $10.0 trillion in Q3 2008. Many have
interpreted this decline as a sign that consumers have become chastened by the
Great Recession’s bursting of the housing bubble and are voluntarily paying
down their mortgage debt to more sustainable levels. For those thinking in such terms, I recommend
a paper further analyzing the same Consumer Credit Panel data that produces
the aggregate debt estimates just cited. In a masterful exercise, Fed economist Neil Bhutta
concludes that the recent drop in mortgage debt has more to do with shrinking
inflows than with expanding outflows, including mortgage defaults:

"While few borrowers, compared to prior
years, have been increasing their mortgage debt, they also do not appear to be
aggressively paying down their mortgages… It is therefore possible that many borrowers might
actually be credit constrained (they would like to increase their debt, but cannot
find a willing lender …).” (p. 3)

A critical
limitation of the Fed’s Consumer Credit Panel data is that it includes very
limited demographic information (only the age of the borrower). But Bhutta’s
findings are supported by a recently released Census Bureau report on the growing wealth inequality in the U.S. that reports on trends in mortgage debt broken down by a wide
variety of household demographic characteristics. These data, collected by the Survey of Income
and Program Participation (SIPP), clearly show a post-Great Recession decline
in the share of young households with home debt (Figure 1) – consistent with a dramatic slowing of movement into
first-time homeownership. At the same
time, the report also shows that the percentage of older households with home
debt has continued to increase. Since
2000, the share of homeowners aged 65-69 with home debt increased by almost 33
percent, and the share of those aged 70-74 increased by almost 65 percent. This trend is consistent with today’s older
owners failing to pay down their mortgages as diligently as did earlier
generations. Both equity extractions to
garner cash to pay for other expenditures, and simple refinancing and extending
the payment period to lower monthly payment costs will slow the pace at which
homeowners pay off their mortgages.

Moreover,
among those households with home debt, overall median debt outstanding has
continued to increase post-Great Recession, albeit at a diminished pace (Figure 2). The increase
in median home debt is especially true among the elderly.Median outstanding home debt for homeowners
aged 65-69 with a mortgage increased by 46 percent between 2000 and 2005, and
another 8 percent between 2005 and 2011.The corresponding figures for 70-74 year old owners with home debt are
18 and 33 percent.This doesn’t
necessarily indicate a recent rise in refinancing activity among these older
households. Rather it likely is attributable to the aging of 60-64 and 65-69
year olds (with higher mortgage debt from the previous periods) into the 65-69
and 70-74 age groups.

Growing
mortgage debt among the elderly is troubling. Declining income later in life is inevitable for most households. With mortgage payments a continuing part of
the monthly household budget, in addition to real estate taxes and the expense
of home repairs, many elderly with high housing cost burdens will need to
postpone retirement or spend less on other needs like food or health care. Fewer will be able to draw on wealth
accumulated through growth in home equity to help pay the bills late in
life. Some will let their homes fall
into disrepair or will be forced to sell their homes when they would prefer to
age in place. This is a trend worth our
continuing attention and concern.

Tuesday, October 28, 2014

In a previous post, I described recent research about drivers of decisions to own homes, with emphasis on the role of behavioral factors. That research confirmed that there is a widespread and deep-seeded preference for homeownership in the U.S., founded largely on beliefs in the benefits of owning, such as wealth development and better outcomes for children. Yet for all homeownership’s assumed advantages, 35 percent of households still rent, and of them, 20 percent report no intentions to buy in the future. This begs the question: who doesn’t want to own a home? Some follow-up research on this topic seeks to answer that question.

We know from my prior research that some demographic groups are less likely to expect to own in the future, including whites, older renters, those with lower incomes, and those without families (Figure 1). Even after controlling for personal characteristics, though, race, age, and income remain important predictors of future tenure intentions; renters over 55 years old, for example, are 28 percent more likely to always rent relative to those under 35 years old. Yet regression analyses based on demographic variables alone can account for only about 10 percent of the variation in renters’ future tenure plans. Thus we must consider some attitudinal factors when seeking to understand what drives intentions to rent for the long term.

Note: Sample includes renters ages 25-64 who plan to move in the future. Bars are the % shares of each socio-demographic subset within the sample that expect to always rent. All characteristics were significant in regression analyses of intentions to rent (results not shown).

Source: Fannie Mae National Housing Survey, June 2010-December 2012.

There are many reasons why someone might not plan to buy a home in the future: perhaps they prefer the flexibility and convenience of renting, which not only allows them to change residences easily but also frees up money that would otherwise be used for a down payment to invest or spend on other needs and desires. Or they may doubt their ability to qualify for or afford a mortgage, and thus do not consider owning to be an option. Or maybe they are pessimistic about the likelihood of receiving many of the assumed financial and personal benefits from owning, particularly given recent events in housing markets.

The same survey data that yielded only weak results with respect to demographic differences in renters who do not intend to buy homes in the future also includes some questions about their preferences and reasons for renting. When asked the primary reason why they currently rent, for example, a third of renters that plan to always rent said they enjoyed the reduced hassle and stress of renting versus owning. Yet when asked why they do no plan to own in the future, financial constraints were a more common response than lifestyle benefits (Figure 2). Specifically, more than half of renters said a major reason they do not intend to buy is because they think they cannot afford it or their credit is not good enough. A similar share, when asked in 2010-2012, said they did not think it was a good time to buy. Reduced maintenance, flexibility to move, and other opportunities for investment, meanwhile, were indicated as a major reason by less than 40 percent of respondents who plan to stay renters in the future.

Note: Bars are the % shares of the sample expecting to always rent that report a major reason they do not own.

Source: Fannie Mae National Housing Survey June 2010-December 2012.

These results suggest that about a third of renters, or 10 percent of all households, rent because of lifestyle and personal preferences. That their reasons appear to be largely idiosyncratic, rather than systematically related to their personal characteristics, further indicates that those who rent by choice do so in spite of strong social biases towards ownership that encourage the remaining 90 percent of households to view owning favorably. More than half of lifetime renters, however, see their tenure options as constrained, either by their own financial circumstances or by macroeconomic conditions. With mortgage lending remaining tight, home prices rising in many markets, and income growth still sluggish (especially for low-income households), these renters are unlikely to change their tenure plans anytime soon.

Tuesday, October 21, 2014

As the youngest of the
baby boom generation has now turned 50, there is much talk about the overall
aging of the U.S. population. But recently released Census Bureau population estimates for states and counties tell a more nuanced story about the
diversity in age structures in the U.S.
The census release notes that the oldest county (Sumter County-FL) has a
median age of 65.5, while the youngest (Madison-ID) has a median age of
23.1. Quite a difference! Other counties among the oldest include
Charlotte-FL (57.5), Alcona-MI (56.9), Llano-TX (56.9), and Jefferson-WA
(55.9). The five youngest counties also
include Radford City-VA (23.3), Chattahoochee-GA (23.9), and Harrisonburg
City-VA (24.2), and Utah County-UT (24.2).
The U.S. median age is 37.6.

We should perhaps not be
surprised that the county with the oldest population is in Florida, or that
Idaho and Utah, with their Mormon influences, should have the counties with the
youngest populations. But what is going on in Michigan, Texas, and Washington
counties to rank among the oldest, and in Georgia and Virginia to produce
places with the youngest populations?

There are three main
demographic factors that influence the age structure of a population:

Domestic
migration patterns of both young adults and the elderly;

Settlement patterns of
international immigrants;

Levels of fertility of both the
immigrant and native born populations.

Differences in life expectancy could also influence age structures if
those differences are large.For states
and counties in the U.S., however, mortality differences are not sufficient to
affect differences in median age.

Places with net domestic
out-migration of young adults, and/or in-migration of elderly will be older
(younger if these migration patterns are reversed). Florida is a destination state for retirement
migration, as are North Carolina, Arizona, and other warm weather and low-tax
states in the south and west. Maine,
West Virginia and many rust belt and Great Plains states lose young adults on
net, so places in these states will also have an older age structure.

Immigrants tend to be
young and have higher fertility compared to the native-born, so places that are
immigrant destinations will be younger.
While states on the coasts and along our southern border still attract
the majority of immigrants, states in the interior have increasingly become
immigrant destinations as immigrant networks have spread beyond gateway
states.

Finally, fertility
levels are the primary determinant of a population’s age structure. When fertility is above replacement (more
children born than reproductive-age adults in a family) the population pyramid
is broader at the base, and median age is lower. The pyramid becomes more
mushroom-shaped when fertility is below replacement, and median age is higher.

When the population unit
is relatively small, as with most of the counties listed above, these
demographic factors can reinforce one another and create extreme values. For larger units of population, such as large
counties, metropolitan areas and states, differences should be less extreme,
but they can still be significant.

The population estimates
from which median ages were calculated contain detail by race/Hispanic origin
and sex, allowing us to examine the percent minority as a surrogate for the
influence of immigration and the boost to overall fertility levels that
immigrants and native-born minorities provide.
We can also look at a measure of recent total fertility by calculating
the ratio of children age 0-4 to women in the primary reproductive ages of
20-44. We cannot get a direct estimate
of net domestic migration by age group from the published population estimates,
however.

The table at the bottom of this post, constructed from the 2013 population estimates, ranks states on median age,
percent minority, and fertility. While
Florida has the county with the highest median age, the state as a whole is
only the 5th oldest, surpassed by Maine, Vermont, New Hampshire and
West Virginia. The lower the percentage
minority in a state, the higher the median age (Figure 1). The oldest states are those where young immigrants and
native-born minorities with higher fertility have not settled. Maine, Vermont, West Virginia and New Hampshire
rank the lowest on percent minority. In addition, the lower the total fertility
rate, the higher the median age (Figure
2). This second relationship is the stronger of the two that are graphed,
and the relationship holds fairly well across the entire range of fertility
(discounting DC as an outlier). The New
England states collectively are also near the bottom of the ranking on total
fertility.

Source: U.S. Census Bureau Population Estimates

Older states may be
destination states for retirement migration, but can also have lost young
adults from out-migration to states with bigger cities and more job
opportunities. For example, according to
the 2012 American Community Survey, Maine gained 27,500 residents from other states
during the previous year, but lost 38,500.
If most of the out-migration from Maine were young adults, the effect
would be to increase the median age.

The youngest states,
however, are more of a mixed bag. Utah’s
very high fertility level – the highest in the nation – is sufficient to secure
its ranking as the state with the youngest median age. Utah is not completely
lacking in diversity - its percent minority (20.3%) is just the 18th
lowest, but the total fertility rate in Utah is primarily driven by its
non-Hispanic white population’s high rate of childbearing. Alaska, the second youngest state, has a
large minority population (mostly native Alaskans), as well as levels of
fertility that are well above the U.S. average.
Its young ranking, however, is likely also determined by in-migration of
young adults to work in energy and nature oriented jobs, and out-migration of
the elderly to warmer climates. The
District of Columbia has achieved its ranking as the third youngest in all
likelihood because of in-migration of young adults to work in Washington for a
spell. These adults are largely single,
as suggested by DC’s extremely low fertility. But also contributing to DC’s
young age structure is the fact that the percent minority is the highest on the
mainland (64.2%). Texas is the 4th
youngest state, both due to its high percent minority (56%) and high
fertility. Texas has received consistent
growth from both immigrants and young domestic migrants in recent years. The final state among the top five youngest
is North Dakota, which has been the beneficiary of considerable in-migration of
young adults to work in the booming energy sector in the western part of the
state. North Dakota’s fertility rate is
also among the highest, attesting to the impact of a favorable economy on family
formation.

Geographic diversity in
age structures has direct implications for housing market dynamics. Places with younger age structures will
require new construction to house young adults, both now and in the
future. If the young age structure is
created by higher fertility, homes will need to be larger to accommodate larger
families. If the younger age is created
by in-migration of singles, a different housing mix is required, at least in
the short run.

Places with older
populations are expected to show a greater balance between supply and demand
for existing housing. An older age
structure brought about by low fertility and out-migration of young adults will
have less need for new construction.
This is especially true if the existing housing is located in places
where young adults want to and can afford to live. However, if future demand for existing
housing by young adults or older in-migrants is not there, older adults may be
less able to sell their homes, and we can expect higher rates of aging in
place. In these places there would be a greater need for modification and
upgrading of existing housing to help the elderly safely stay in their
homes. On the other hand, if the older
age structure is primarily the result of in-migration of retirees, and if that
in-migration is sustained, there will be more opportunities for new
construction and for the elderly to sell their homes in order to adjust their
housing needs.

Source: 2013 Census Bureau population estimates for states and counties.

*Fertility Rate is the number of children age 0-4 per 1000 women age 20-44.

Thursday, October 16, 2014

Reflecting the slow pace of recovery in the overall housing
market, the home remodeling industry is expected to continue its path of
moderating growth, according to the Joint Center's most recent Leading Indicator
of Remodeling Activity (LIRA), released today. The LIRA projects annual growth in home
improvement spending to ease to 3.1% through the second quarter of 2015.

Stronger gains in remodeling
activity are unlikely given the recent slowdowns we’ve seen in housing starts,
sales, and house price gains. While the continued recovery
in employment should ultimately keep the market on an upward trajectory, remodeling is likely to see slower growth
rates moving into 2015. Growth in home remodeling
activity continues to hover around its longer-term average of mid-single digit
gains. Even though the
housing market overall has been lackluster, many areas of the country remain
economically healthy and remodeling contractor sentiment remains high.

NOTE ON LIRA MODEL:An important change was made to the LIRA estimation model
beginning with the first quarter 2014
release. With the upheaval in financial markets in recent years, the
traditional relationship between interest rates and home improvement spending
has significantly deteriorated. As a result, long-term interest rates have been
removed from the LIRA estimation model. For more information on the implications
of this change, please read our blog post from April.

For more information about the LIRA, including how it is calculated, visit the Joint Center website.

Wednesday, October 8, 2014

Now that we have reached the half-century mark since President Lyndon
Johnson began passing legislation to achieve his vision of a Great Society, it
is worth remembering one momentous law that has been largely forgotten: the
Housing and Urban Development Act of 1968. When he signed the act, LBJ declared it to be “the most farsighted, the most comprehensive, the most massive housing program
in all American history.” Truly, its goal was breathtaking: to replace within
ten years every slum dwelling in the country by building six million homes for
low- and moderate-income families.

The great accomplishment of the 1968 act was to shift housing
policy toward programs that used the private sector, not government, to create
and run low-income housing. Until the law was passed, public housing was the
nation’s principal social-welfare program.
The public housing program dated from the 1930s and, as a creation of
the New Deal, used government agencies to develop, own, and manage apartments
that were rented to low-income people. In
the 1960s, few federal programs used private developers to provide social
housing, and those that did had produced only small numbers of dwelling units.

And then came the long hot summers. Violent riots rocked the African-American ghettos
of American cities, leaving hundreds dead, thousands injured, and tens of
millions of dollars of damage from burning and looting. The situation called for action, especially in housing. Most observers –
including the famous Kerner Commission (officially named the National Advisory Commission
on Civil Disorders) – were convinced that a major reason that African Americans
were rioting in the streets was that they were condemned to live in ghetto slums.

Seeking a way to right this wrong, President Johnson established a
blue-ribbon committee to rebuild the slums of America. But the president made
clear that he wanted recommendations that would fall outside the traditional
confines of the government-run programs that he had long championed. “We should call upon the genius of private
industry,” LBJ asserted, “to help rebuild our great cities.”

At the time, executives from hundreds of businesses were
volunteering to help solve the nation’s pressing urban and social
problems. The president welcomed these
“public-private partnerships,” in part because the soaring costs of the Vietnam
War prevented him from asking Congress to foot the entire bill for his
ambitious social programs. Thus, LBJ named the president of the corporate
conglomerate Kaiser Industries, Edgar Kaiser, to head his housing committee, stacked
the committee with business executives, and asked them to propose ways that businesses
– not government – could rebuild the slums.

Taking Johnson’s cue, Democratic Congressional leaders, Robert
Weaver – by then secretary of the new Department of Housing and Urban
Development (HUD) – and the Kaiser committee worked together to write the
ambitious social housing legislation to be carried out by the private sector. In the summer of 1968, Congress passed the
bill by overwhelming margins.

Remarkably, the once bitterly divided housing field came together to
support the bill. For decades, liberal
interest groups had fought ardently to promote public housing, while industry
trade associations fiercely opposed public housing at every turn. Now liberals recognized that public housing
was politically unable to generate six million new low-income housing units and
agreed to try a new approach. The industry
trade groups naturally approved of the 1968 act’s private-sector programs. After all, the officers of the National
Association of Home Builders had worked with the Kaiser committee, the
Democratic congressional leaders, and HUD to shape the bill’s provisions. This political truce proved to be a historic turning
point: since the 1968 liberal reformers and housing industry leaders have
worked together to lobby the government for low-income housing.

The 1968 act contained three major housing programs. Perhaps the most successful was the rental housing
scheme, called Section 236. It provided private
developers of low-income housing with financial incentives, including subsidizing
the interest rate they paid on their mortgages. By end of the 1970s, this rental program had
encouraged the development of about 540,000 apartments, which exceeded the
output of the public housing program. The financial incentives were poorly conceived,
however, and in 1974 the federal government replaced the program with the better
known and even more productive Section 8 program, which relied on the simpler
mechanism of rental assistance to promote new construction. In 1986, the
government enacted low-income housing tax credits, which has become the most productive
of all the private sector type of housing programs. As a result of the changes started by the
1968 act, today private organizations, about three-quarters of which are for-profit
companies, develop most subsidized low-income housing in the United States.Another of
the 1968 act’s programs helped low-income families purchase their homes. When a popular Republican senator from
Illinois, Charles Percy, proposed a homeownership plan that utilized nonprofit
agencies to counsel and first-time low-income home buyers, Senate Democrats and
HUD officials pushed aside his plan and passed a large-scale building
program that subsidized private lenders and promoted private home builders. In
the 1970s this program produced 419,000 new homes for low-income families. It was temporarily halted in the mid-1970s due
to a scandal and terminated in 1987, but low-income homeownership returned in
the 1990s to become a permanent fixture of American housing policy.

Madison Park Village in the Roxbury neighborhood of Boston; an example of subsidized housing built after 1968 (Photo by Glenna Lang)

The Kaiser committee contributed the third component of the 1968 act’s
social provisions for private housing finance.
It established the National Corporation for Housing Partnerships (NCHP),
which raised money from corporate members and investors to provide working
capital and, if needed, technical assistance, to developers of local housing projects.
It turned out that Section 236 tax
incentives, especially the use of accelerated depreciation schedules, attracted
the bulk of investors so that in ten years the NCHP helped develop a relatively
meager 40,000 dwellings. It pioneered
the syndication of low-income housing, which resurfaced later and particularly after
1986 when syndicators found corporate investors to purchase low-income housing
tax credits in return for equity investment in housing projects.

The Housing and Community Development Act of 1968 began a transformation
of American housing policy. At a time of
national urban crisis, it brought warring housing interest groups together in a
political alliance that has persisted ever since. Moreover, the law turned away from
government-centered public housing and firmly committed the federal government
to using private-sector agents – especially for-profit businesses – to develop
and run social housing. Reflecting the thoroughness
of this transformation, private developers now routinely redevelop public
housing projects. As we commemorate the many landmark Great Society laws, don’t
you think we should recall the 1968 housing act?

Thursday, October 2, 2014

In recent years,
the Federal Reserve Bank of New York’s Consumer Credit Panel (FRBNY CCP),
which provides quarterly data on outstanding loans using individual
consumer credit report data acquired from Equifax, has been utilized
extensively to highlight the dramatic growth in student loan debt.
Indeed, according to the FRBNY CCP, the increase in student loan debt
over the past decade is alarming: aggregate balances averaged $1
trillion in 2013, $775 billion higher than the annual average in
2003, and accounted for over a third (36 percent) of non-housing debt
held in aggregate in 2013, up from just 12 percent in 2003.

Since data is released quarterly, the
FRBNY CCP is useful for providing up-to-date numbers on current
federal and private student loan debt levels. However, the CCP data
does have several drawbacks: historical data on student loan debt is
not available before 2003, the CCP’s sample is limited to
households in which at least one adult has a credit report, only
aggregate numbers on outstanding student loan balances are released
quarterly to the public, and public information on the demographic
characteristics of student loan debtors is limited.

In contrast, the newly released
triennial Survey of Consumer Finances (SCF) from the Federal Reserve Board dates
back to the 1980s, includes households without credit reports, and is
publicly available as a micro-dataset with detailed information on
student loan debt balances, as well as a variety of demographic and
financial characteristics, including age, income, tenure, education
level, race, assets, and other types of outstanding debt.

Both the CCP and the SCF indicate
continued growth in aggregate student loan debt, but the SCF shows
much slower growth in recent years than data from the FRBNY CCP.
In 2013, the SCF’s estimate of $710 billion of aggregate student
loan debt was 44 percent lower than the $1 trillion estimate
of student loan debt cited by the FRBNY Consumer Credit Panel. The
gap between the aggregate estimates of student loan debt from these
two sources may be attributed to several factors. As this FRBNY paper points out, the SCF’s sample excludes those in
institutions, which may lead to underreporting of debt held by
students living in dorms and other institutional housing. Secondly, the SCF’s use of a single survey respondent as a proxy
for household finances could result in underreporting of student debt
held by adult children or other household members of which the respondent
is unaware. However, given that only a decade’s worth of data on
student loan debt is available through the CCP, the SCF is still a
better dataset for analyzing education-related debt trends because
researchers can track changes in student loan debt over a longer
period of time under various economic conditions. As many borrowers
in the SCF sample are interviewed ten years or more after taking on
student loans, researchers are able to analyze the long-term impact
of carrying student loan debt. Furthermore, given the greater
availability of variables on demographic characteristics and other
financial information, one can create a more robust profile of
households with student loan debt.

Despite its overall lower estimate of
student debt, the SCF still shows that over the past decade, it has
become increasingly common for households across all age groups to
carry student loan debt (Figure 1). Among households aged
20-29, 43 percent are carrying outstanding student debt, a slight
uptick from the 41 percent share in 2010 and 14 percentage points
higher than the share in 2001. At the other end of the age spectrum,
23 percent of households aged 40 to 49 and nine percent of those aged
50 and over, have student loan debt, more than double the shares of
same-aged households in 2001.

On the whole, hefty student loan
balances are not common, but the share shouldering a substantial
amount of debt has climbed steadily over the past two decades: in
2013, 17 percent of households with student loans had a balance of
$50,000 or more, more than double the share in 2001 (7 percent) and
nearly five times higher than the share in 1989 (Figure 2). And both younger and older households are saddled with higher student
loan debt balances. In 2013, 15 percent of households aged 20 to 29
carried a balance of $50,000 or more, up from just 2 percent in 2001,
and 14 percent of households aged 50 and over had a similar debt
burden, double the share of same-aged households in 2001.

Note: Excludes households without student loan debt. Shares are based on values that have been adjusted to 2013 dollars using the CPI-U for All Items. Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances.

While recent reports, including this one from New America, have attributed the growth in student debt
levels to those who are obtaining graduate and professional degrees,
the SCF shows that households headed by a recipient of a graduate
degree or higher made up 35 percent of those with $50,000 or more in
outstanding student loans in 2013, down from 72 percent in 2001 (Figure 3). In fact, the most indebted households are now more
likely to be headed by an adult who earned a bachelor’s degree or
less. Among the most indebted households headed by an adult without a
bachelor’s degree, those who started but did not complete college
represented more than a third (37 percent) of this group.
Furthermore, those under the age of 40 accounted for 57 percent of
the most indebted households headed by an adult without a bachelor’s
degree in 2013, though nearly a quarter of this group is aged 50 or
over.

Note: Excludes households without student loan debt. Shares are based on values that have been adjusted to 2013 dollars using the CPI-U for All Items. Education level is for highest degree earned by head of household. Less than a bachelor’s degree includes households with a head who started but did not complete college, who earned an associate degree, or those whose highest educational attainment was a high school diploma, GED or less. Graduate degree or higher refers to households headed by a recipient of a graduate degree, doctorate or other professional degree. Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances.

Much of the discussion around student loan debt is around the idea that it is a major stumbling block in the housing recovery, inhibiting young households’ access to homeownership. However, other groups with rising student loan burdens—older households and those without a bachelor’s degree—have not garnered as much attention. The growing share of less-educated households with a significant amount of student loan debt is especially worrisome, given that this group is much less likely to earn sufficient income to meet their monthly debt obligations. We’ll be doing a more thorough analysis to address these issues over the coming months.

Sunday, September 21, 2014

Recently, the Joint Center has been researching what makes a
healthy home. As Mariel Wolfson pointed
out in her recent blog, indoor air quality has been a major component of modern healthy home
research dating back to the 1970s. Radon,
formaldehyde, and combustion pollution from cooking and heating are
traditionally identified as key risks. One
emerging topic that has yet to be understood is how microbial communities living
among us affect household health. As it
turns out, these microbiomes (diverse communities of bacteria and other
microorganisms sharing space with humans) are not well understood, but have
great potential to impact human health indoors.

Earlier this year, I had the opportunity to attend a symposium on Microbiomes of the Built Environment at the American Association for the Advancement of
Science (AAAS). With some astonishment,
I discovered there are millions of microbial species on earth, and while some are
pathogens that are linked to illness and diseases, the majority are beneficial
for humans. For example, microbes have
the potential to educate our immune systems, produce vitamins, energy,
anti-inflammatories, and even neurotransmitters.

The squeamish may wince, but the fact remains: humans live in a sea of indoor bacteria—at
home, work and in other public spaces—many of which promote human health. Indeed, a central theme of the conference was
that people not only need to be protected from pathogens, but they also need to
be exposed to diverse microbes, especially at a young age.

Further research is needed on this front. The vast majority of these microbes have yet
to be classified. And scientists don’t
yet understand what constitutes a ‘healthy’ microbiome in the built environment.
More research is also needed on how to design,
properly maintain, and fix buildings to prevent or eliminate problematic
microbial indoor communities. Currently,
the Alfred P. Sloan Foundation is investing millions of dollars into a Microbiology of the Built Environment Program to study these and many other
questions. While answers remain far off,
I came away from the conference with several takeaways relevant to the residential
housing sector:

1.Building
design and management both play a role in the transmission of microbial
communities. In any built
environment, the rate and efficiency of air circulation and filtration, as well
as disinfection by UV light, all impact transmission of microbiomes. Rooms in
same air handling units have similar microbiomes. Even the type of ventilation—mechanical
versus natural—impacts the diversity and composition of microbial communities
indoors. All of this suggests a distant,
future role for ‘bioinformed’ design and management of homes and other
residential communities.

2.Building
materials, and even appliances and fixtures, impact growth of microbial
communities. Bamboo, for example,
widely heralded as a cheap and rapidly renewable building product, also exhibits
rapid oxidative aging, enabling mold to grow more rapidly once the wood has been
aged for long periods. Even showerhead
design can impact the spread waterborne microbial communities. Some high efficiency showerheads can put out
a fine mist that enters deep into human lungs, the effects of which need to be
examined further. Additional research
and understanding is undoubtedly needed on how a variety of materials, fixtures,
and appliances impact indoor microbial communities.

3.Water
quality will remain a challenge.
Scientists know surprisingly little about our drinking water’s microbial
composition. Additionally, while the quality of U.S. drinking water is
exceptionally high by world standards, our water infrastructure is aging and
“nearing the end of its useful life,” according to the American Society of Civil Engineers. The cost
for replacement may be as much as $1 trillion over the next several
decades. As concern for water
sustainability increases, water may be sitting in pipes longer, which may promote
the growth of bacteria. A prominent
example can be seen in the case of hands-free faucets that can pose risks in a hospital setting.

4.While
scientists still don’t understand what a ‘healthy’ indoor microbiome may be,
some preliminary findings and suggestions were offered to promote indoor
health. Most prominently, dampness
and mold are widely identified as known factors associated with asthma, eczema,
and other related health problems under the umbrella of ‘sick building
syndrome.’ As Dr. Mark Mendell explained
at the conference, films of fungi or bacteria on air conditioning coils are
likely responsible for many of these cases.
Identifying and removing extra building moisture, removing settled dust,
and properly operating and maintaining HVAC systems were are all recommended
for preventing and remediating sick building syndrome. A helpful 2012 alert
from the National Institute for Occupational Safety and Health (NIOSH) contains
further guidelines. In addition to
protecting against pathogens, some epidemiological evidence suggests that having dogs at home may actually protect
against asthma early in life by facilitating exposureto diverse microbes.

If and when scientists do eventually unravel the complex
riddle of what constitutes a healthy indoor microbiome, further questions and
challenges will remain. How can healthy,
bioinformed buildings be designed and maintained? Perhaps an even greater challenge will be
what to do from a policy perspective. Should architects, building scientists,
and policy makers take steps to promote certain bacterial communities in
buildings? As Dr. Jeffery Seigel
pointed out at the conference, public perception could be tricky—for instance,
if people get sick inside a building designed to promote certain bacteria, they
could assume it’s because of the particular microbiome in the building.

Study of microbiomes in the built environment is a
challenging and wild frontier in the realm of healthy housing research, but findings
relevant to residential health likely will inform consumers’ future home
improvement behaviors and spending. Indeed,
according to a recent Joint Center survey, one out of every four homeowners expressed
concern about some aspect of their home negatively impacting their household’s
health. And among owners specifically concerned about ‘invisible’ risks, such
as indoor air or water quality, more than
half took at least one specific action to remediate their concern,
including installation of water filters, mold removal, and choice of paints
with low- or no airborne toxins. In
other words, U.S. consumers’ perception of invisible health risks and problems,
and their growing knowledge of best practices in healthy housing, impacts their
home improvement behavior. Further developments
in healthy housing research likely will impact
their choices of remodeling projects and materials, and may even influence how they
go about choosing remodeling contractors who they feel will best protect and
even promote their households’ health.

About

Drawing from the ongoing research and analysis of the Harvard Joint Center for Housing Studies, Housing Perspectives provides timely insight into current trends and key issues in housing. We dig deeper into the housing headlines to discuss critical issues and trends in housing, community development, global urbanism, and sustainability. Posts are written by staff of the Joint Center, drawing from their wide-ranging knowledge and experience studying housing. We hope you will follow Housing Perspectives, and we welcome your comments.

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